The worldwide market for Dynamic Random Access Memory chips (DRAMs), meanwhile, would drop 13 percent to $17.2 billion. However a recovery should begin in 1999, the association said.
I think the 1999 recovery date is factored into the market. As for DRAMS, the key to understanding CYMI's market is to find out where die sizes are shrinking. Wherever a factor is moving to submicron fabrication, you'll find installations of DUV photolithography equipment.
According to what I've heard from the company and read in the press, ASM Lithography will be increasing its orders more than Nikon and Canon, so watch for their name more than the others for an indication of where the market's headed.
Value of prime real estate is an early indicator of Japan's economic turnaround. From yesterday's WSJ:
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Bright Spot: Top Tokyo Properties
Post First Rise in Value Since 1991
By JATHON SAPSFORD
Staff Reporter of THE WALL STREET JOURNAL
TOKYO -- The economic news out of Japan gets gloomier by the day, but there is at least one small bright spot: Prime commercial real estate in Tokyo is rebounding.
Property values in 20 of Tokyo's most prestigious business and residential districts rose last year for the first time since 1991 -- in some cases by as much as 5%, according to a government survey. In addition, a Sumitomo Trust & Banking study finds that total returns on commercial properties turned positive in two of Tokyo's eight biggest business districts; most such properties lost money from 1991 through 1996.
In the posh Ginza shopping district, values in March were as much as 4% higher than a year earlier, the first increase in years. Sleek office buildings are going up in Marunouchi, the district right across from the emperor's palace. Contractors are putting up residential buildings in Minato ward, home to many diplomats, executives and entertainers. Office utilization in the tony Shibuya district is 96%; landlords there say they are turning away would-be tenants.
Minoru Mori, president of Mori Building, a major developer, plans seven large-scale projects, including offices, residences and a hotel -- all in Tokyo's best neighborhoods. "Tokyo tends to lead the rest of Japan," he says. "And I believe that Tokyo's era is going to come again."
So far, there are no signs that the upturn in Tokyo's prime areas is spreading to the broader property market. In fact, overall land values in Japan declined in 1997 for the seventh consecutive year; residential property fell 1.4%, and commercial property 6.1%. Tokyo commercial-property values remain 80% below their 1991 peak. The economy, meanwhile, is in bad shape.
Best Properties Lead the Way
Yet developers say the prime-property rebound is important because real-estate markets as a whole tend to follow values of the best properties. "This is what happened in New York," says Yutaka Kumada, a property consultant at Sumitomo Trust.
Some economists say a real-estate recovery would do more to lift Japan's economy than anything else. Consumers would feel wealthier, building would pick up, and banks could more quickly fix their $600 billion problem with bad property loans. Stronger balance sheets at the banks would encourage lending and ease the credit crunch now hobbling many businesses. "A property-market recovery," says Masahiko Tsuyuzaki, director of Japanese equity sales at ABN Amro Securities, "would send the Nikkei Stock Average soaring."
Much demand for Tokyo's best buildings comes from a heretofore unlikely source: foreign businesses. Prime Minister Ryutaro Hashimoto's "Big Bang" financial-reform programs, along with broader efforts to liberalize industries from retailing to petrochemicals, are luring droves of foreign companies that demand high-quality office space, a scarce commodity here.
Merrill Lynch rented out two floors in Marunouchi for a new retail-equities operation. Fidelity Investments bought land for a new data-processing facility. American International Group acquired a whole new building last year. Deregulation will also increase the supply of office space as weak companies vacate it. But with Tokyo short on quality space, developers are betting that the supply of desirable locations won't meet the growing demand from the top foreign and domestic service companies.
Goldman Is Expanding
"This is the biggest source of demand right now," says Mr. Mori, who is landlord to Goldman Sachs. In Japan for decades, Goldman is expanding in newly opening markets such as asset management. It increased its staff by 36% to 680 in the year ended in March. It recently added a new floor to its Tokyo headquarters and is looking for even more space.
"Clearly, the Big Bang holds promise for us," says Mark Schwartz, president of Goldman's Japan operations. Nonfinancial foreign companies also are increasing demand for prime property. Hewlett-Packard, Sun Microsystems, the Gap, Toys 'R' Us and British Petroleum, for example, see deregulation expanding opportunities and are staffing up in Japan. Tokyo's Westin and Hyatt hotels report 90% occupancy, thanks to visiting foreign businesspeople, and Hyatt plans a new Tokyo hotel to accommodate more.
The prime-property recovery feeds on itself, as foreign builders and vulture funds enter Japan to troll for real-estate deals. After Pacific Century, a Hong Kong builder, won a prime piece of property auctioned last year, Japanese investors bid higher than expected at a similar auction this year.
One object lesson for Japan's policy- makers: Deregulation can, indeed, lure business and revitalize critical sectors of the economy. "Deregulation was a big reason the U.S. was able to create new business and demand" for property, says Masaru Hayami, the governor of the Bank of Japan. "We need to do that."
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